Good Start to 2012 Expected for P&C Industry: KBW

Due to low catastrophe activity Keefe, Bruyette and Woods expects good first-quarter earnings for the property and casualty insurance industry.

In an earnings preview, the global investment bank says “the financial impact of catastrophes appears to have been relatively mild” in the first quarter. Plus, many companies balanced reserves during the 2011 fourth quarter for catastrophes last year, so the firm expects “little noise from prior events.”

As a result, KBW says it has raised earnings-per-share estimates for many of the insurance carriers and brokers it follows.

Rates are up in the mid-to-high single digits in U.S. commercial and low double digits in U.S. reinsurance sectors, observes KBW. Increases are also seen in places that experienced larges losses in 2011, with flat to slight increases across most other lines.

However, benefits from reserve releases could decline in the first quarter, and low investment yields are ongoing, adds KBW.

For personal lines, rate increases in the 5 percent to 7 percent range are being seen in homeowners. Increases are in the 2-to-3 percent range for auto, and KBW expects a premium growth rate of 5 percent to 7 percent.

KBW says earnings for Bermuda reinsurers will be aided by favorable renewals at Jan. 1, and there were few first-quarter costly catastrophes.

Turning to regional agencies and specialty carriers, KBW says its expects pricing commentary during first-quarter conference calls to be positive, but it’s unclear whether rate increases will show up in reported premium growth.

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